What is Local Money Transfer?
Local Money Transfer means sending money from one bank to another electronically. It’s like sending money from one bank to another, one account to another but within same country. Sometimes it also refers to cross-border payments in which you make a deposit to a foreign bank account. It is also known as ACH, EFT (electronic funds transfer) or Global ACH.
The process of local money transfer varies from bank to bank and country to country. Local transfers are used for a variety of purposes such as salaries, business payments, payouts, and commission payments.
It’s faster than the traditional method. Like writing a cheque and sending it through mail or sending hard cash. Thanks to fintech and the revolution it brought in online banking. Users can transfer money conveniently from anywhere in the world.
How do Local Money Transfer Work?
Local Money Transfer starts with sender providing their bank account details. It will include recipient’s bank account details, name, and branch information. Senders will use these details and send their money to the receiver.
Generally, transfer work in this way that you initiate the money transfer by making a phone call, visiting the bank or through the banking app. Bank gets your request of making the transaction and it starts processing it.
Banks do not pass the money in the form of cash. But they pass the information to the receiving bank that someone wants to make a transaction. Bank does not pass the money until the money is not debited in the sender bank and then receiving bank allows the money to be taken out.
Now the question arises how the banks communicate for it. Because of course, money matters cannot be done through simple emails. So, for reliability and security banks use SWIFT network for communication and messaging.
It’s because all banks are not connected directly to each other, and they cannot pass the information directly. Though some banks might be directly connected to each other, and they are payout partners.
When banks are not directly connected, information comes through different channels. It comes through a mediator. The mediators are mostly financial institutions or banks. The more mediators are involved, the longer it’s going to take. Also, it will charge different prices as every bank is going to have different fee systems.
The fees can include transfer fee, incoming transfer fee, currency exchange fee, and upfront fee. Exchange fees are mostly hidden in transfer fees.
Benefits of Using Local Money Transfer Services
Local Money Transfer methods are often cheaper option if you run a large business. Here are a few listed down for you.
Cost-friendly
Local money transfer options are often cost-friendly because there is no hidden fee involve. It becomes easier as routing becomes a fee option for account holders. Comparatively, wire transfers are costly because it involves conversion cost and other fees.
Global Reach
Since last decade freelancing is common. Many online and digital businesses are running by taking services from people outside their countries. It’s because the third world provides cheaper labor. Now when these businesses must transfer money, they must send money to these freelancers and contractors.
If international suppliers and independent contractors use local money transfer services, it will decrease the workload to half and increase the money flow.
Instead of having accounts in different bank you can simply make a payment batch and payments will be automated and sent to the respective people.
Convenience
Local payments are convenient especially if you have an account in the respective country. You can simply make the transfer through your app or by buying visiting the bank. If you send money more often to respective countries, having an account will make the transfer way easier and smoother.
Time Saving
Batch payments make your life easier as you don’t have to hire a team of accountants or do special payment processes. You can just group the payments and do all at same time. It will save your time. Also, you won’t have to spend more money for hidden fees and conversion rates.
Difference Between Local Money Transfer and International Money Transfer
An international money transfer is when you send money through global networks for international payments. They use the SWFIT system, which is a network between financial institutions.
Local money transfers do the payment processing in the form of ACH (Automated Clearing House network), Global ACH, or eCheck (the digital version of a paper cheque). However, the EFT (electronic fund transfer) process by which local bank transfer payments are made varies depending on regulatory requirements.
Local bank transfer does not involve biggies or networks like SWIFT. They simply take the request of someone who wants to send money and check if someone is making the corresponding request. And credit the recipient’s request.
How to Send Money Locally in the UK
Europe has a history of setting up payment schemes to make local payments efficient. The SEPA schemes have been quite famous for local payment schemes since 2008, but it doesn’t work well in the UK. It is because SEPA schemes do not support the UK’s currency.
UK has its local payment systems, which are Faster Payment System, Bacs direct credit and direct debit, and CHAPS.
To make these payment methods work, every bank has its unique six-digit code. This code can be equivalent in use to the BIC in the SEPA zone or the SWIFT code used for cross-border payments. Every bank account has a unique account number composed of eight digits.
Faster Payments Service
It came into the market in 2008. Its purpose was to make payments easier and faster. Its payment limit is up to £1Mf. Its time limit is 2 hours, and it works 24/7. The rate is as cheap as £0.05. It’s popular in UK payment schemes.
CHAPS
CHAPS stands for Clearing House Automated Payment System. It’s a popular payment scheme. It sends payments on the same day. If your payment is made before 3 PM, they will process it the same day. The fast services charge some amount. If you send via CHAPS, you will have to pay £30.
You should use CHAPS if you have to make a fast payment and in large amounts. Bank of England processes CHAPS payments. It uses the SWIFT MT format.
Bacs
Bacs stands for Bankers’ Automated Clearing System. It is the leading payment scheme in the UK. Pay. uk operates Bacs. Both credit and debit payments are done in three days. Individuals can send money up to £ 20M. However, the business payments can be £ 999M. These payments are for businesses, banks, and governments.
Conclusion
Local Money Transfer means sending money from one bank to another electronically. It’s like sending money from one bank to another, one account to another, but within the same country. Sometimes it also refers to cross-border payments in which you deposit to a foreign bank account. It is also known as ACH, EFT (electronic funds transfer), or Global ACH.
However, local money transfers can also send money across the border. Local payments are convenient, especially if you have an account in the respective country. You can simply make the transfer through your app or by visiting the bank. If you send money more often to respective countries, having an account will make the transfer way easier and smoother.
FAQ
What is a local money transfer?
The local transfer is a payment that you can make by making a call, visiting the bank or through the app. The bank then takes your request and starts making the payment. It pays only when the money reaches the destination
Who is the best money transfer?
CHAPS, Faster Payments Service, and Bacs are three payment schemes. CHAPS is the most popular. But its charges are a bit higher. On the other hand, the Fast Payment Service is cheaper.
How can I send money locally in the UK?
You can use bank as well as local payment schemes.CHAPS, Faster Payments Service, and Bacs are three payment schemes. CHAPS is the most popular. But its charges are a bit higher. On the other hand, the Fast Payment Service is cheaper.
How can I transfer money without going to the bank?
You can make the online payment. You can use the bank app or by making the call. They will ask you for certain details to verify if it’s really you. Then, they will make your transaction.
Is It Better to Transfer Money in Local Currency
Local money transfers can be easier and cheaper. It’s because it doesn’t involve big banks or financial networks. Also, it doesn’t have charge the exchange rates.
